Valuing Mortality Risk Reductions for Environmental Policy: A White Paper

1 Introduction 2 The valuation of human health benefits is often a crucial, but sometimes controversial, aspect of 3 the application of benefit-cost analysis to environmental policies. Valuing the reduced risks of mortality, 4 in particular, poses a special set of conceptual, analytical, ethical and empirical challenges for economists 5 and policy analysts. This white paper addresses current and recent U.S. Environmental Protection 6 Agency (EPA) practices regarding the valuation of mortality risk reductions, focusing especially on 7 empirical estimates of the ‚value of a statistical life‛ (VSL) from stated preference and hedonic wage 8 studies and how they might be summarized and applied to new policy cases using some form of benefit 9 transfer. Benefit transfer concepts will be highlighted throughout the paper, since any application of 10 existing empirical estimates of values for health risk reductions to new policy cases is inherently a benefit 11 transfer problem. 12 The main intended audience for this paper is EPA's Science Advisory Board-Environmental 13 Economics Advisory Committee (EEAC). The main objectives of the paper are to highlight some key 14 topics related to the valuation of mortality risks, and to describe several possible approaches for 15 synthesizing the empirical estimates of values for mortality risk reductions from existing hedonic wage 16 and stated preference studies for the purpose of valuing mortality risk reductions associated with future 17 EPA policies. Some of these approaches could be implemented in the short term, but others will likely 18 require longer term research. We are soliciting general feedback and specific recommendations from the 19 SAB-EEAC on each of these key topics and approaches. 20 1.1 Key topics 21 We highlight several issues in this paper, offering preliminary recommendations where we feel 22 conclusions can be supported by existing data and methods. In other cases we describe alternative 23 methods, data and data gaps, and possible future directions, with the intention of soliciting meaningful 24 SAB Review Draft 4 feedback from the EEAC. The key topics addressed in this paper—loosely ordered from short-to longer-25 term tasks—include: 26 Improving communication by reporting value estimates in terms of risk changes rather than " statistical lives. " 27 We fear, as do others, that the prevalence of such terms of art as ‚the value of a statistical life‛ has 28 contributed to unnecessary confusion and consternation among decision-makers and members of the 29 general public. We aim to ease …